Business Valuation Checklist

There are many good reasons to get a professional business valuation.  Assuming your small business is your family’s largest asset isn’t it smart to have a realistic idea of what it’s worth?  Use this framework to gather information to evaluate the value of a business.
How often should this be used?
When preparing for or valuing a business.
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Business Valuation

Obtain financial information

Last 3 years profit and loss statements and balance sheets.
Last 3 years cash flow.
Details of all major assets.
Details of all major liabilities, borrowings, creditors, tax, leases, superannuation and other employee entitlements.
Management accounts if any.
Budgets and performance to past budgets.
Any profit/cash flow projections.
Details of any contingent liabilities.

Obtain market information

Market this business is in.
Competitors – check who they are and how many.
Check any barriers to entry.
Spread of customers.
Spread of suppliers.
Market share the business has.

Information analysis

Type of income.
Profit margins.
Business stability.

Other factors affecting value

Skills required of management and staff.
Quality of management.
Industry lifecycle.
Reliance on owner operator.

Selecting a valuation method

Capitalisation of earnings.
Estimating future cash flows and applying a discount for the time value of money and degree of risk.
A notional realisation of the assets of the business less the liabilities associated with them.
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